Chapter 12: What Really Impacts Local Business Climate: Evidence of the Need for Entrepreneurship-Friendly Policy and Entrepreneurial Role Models

This chapter explores the perceptual side of business climate, arguing that individual perceptions of local business climate are directly impacted by views of external factors. To illustrate this, a conceptual scheme is proposed which highlights the cumulative nature of these factors and the impact they have on one’s perception of the local business climate. The conceptual scheme focuses on six primary determinants that past research has linked to the emergence of entrepreneurs: government, role models, media coverage, colleges and universities, bankers and investors, and community groups and organizations. Tested over a 3 year period from 2008-2010, using data from 2,000 U.S. small and medium sized enterprises, results indicate that favorable government policy and the existence of entrepreneurial role models have the strongest and most consistent impact on perceptions of the local business climate. Implications for climate perceptions and their determinants are discussed.